a

GAO

United States General Accounting Office

Report to the Chairman, Committee on 

the Budget, House of Representatives

December 2001 ENVIRONMENTAL 

LIABILITIES

Cleanup Costs From 

Certain DOD 

Operations Are Not 

Being Reported

GAO-02-117

Page i GAO-02-117 Environmental Liabilities

Contents

Letter 1

Results in Brief 3

Background 6

Unreported Cleanup Liabilities Are Significant 11

Real Property Records and Cost Estimating Methodologies Are Not 

Reliable 15

Leadership and Focus on Cleanup Costs Are Lacking 21

Conclusions 21

Recommendations 22

Agency Comments and Our Evaluation 22

Appendixes

Appendix I: Objectives, Scope, and Methodology 26

Appendix II: Locations Visited 29

Appendix III: Comments from the Department of Defense 31

GAO’s Comments 37

Appendix IV: Installation-Level Data on Environmental Sites, Estimated 

Cleanup Costs, and Errors in Real Property Records 40

Appendix V: GAO Contacts and Staff Acknowledgments 43

Tables Table 1: Estimated Cleanup Costs at the Six Installations Visited 13

Table 2: Operational and Reporting Status of Cleanup Sites at the 

Six Installations Visited 13

Table 3: Errors in Real Property Records 18

Table 4: Type and Number of Sites Requiring Cleanup 40

Table 5: Operational and Reporting Status of Sites Requiring 

Cleanup 40

Table 6: Estimated Future Cleanup Costs by Environmental 

Category (in millions) 41

Table 7: Estimated Future Cleanup Costs by Operational/Reporting 

Status (in millions) 41

Table 8: Errors in Real Property Records 42

Figures Figure 1: Hazardous Waste Storage Bunker 9

Figure 2: Underground Storage Tank Being Transported After 

Removal 9

Figure 3: Open Burn/Open Detonation Site 16
Contents

Page ii GAO-02-117 Environmental Liabilities

Figure 4: Solid Waste Landfill 17
Page 1 GAO-02-117 Environmental Liabilities

United States General Accounting Office

Washington, D.C. 20548

A

December 14, 2001 Letr

The Honorable Jim Nussle

Chairman

Committee on the Budget

House of Representatives

Dear Mr. Chairman:

The previous Chairman of your Committee expressed concern about the 

long-term budgetary implications associated with environmental cleanup 

costs1

 related to the ongoing operations of the Department of Defense 

(DOD). Since most of these costs had not been reported by DOD, the 

Chairman requested that we review and report on (1) the scope of ongoing 

operations at DOD installations that have associated environmental 

cleanup costs, (2) the potential magnitude of cleanup costs associated with 

those operations, and (3) the availability of data to develop related cleanup 

cost estimates. Ongoing operations refer to general property, plant, and 

equipment (PP&E)2

 facilities or other assets that are currently being 

operated or are currently in use on DOD installations. Examples of 

operating facilities and other assets with associated cleanup costs include 

hazardous and solid waste landfills and incinerators, hazardous waste 

storage facilities, open burn/open detonation sites, and underground 

storage tanks. 

1

 Cleanup costs are those associated with hazardous waste removal, containment, or 

disposal and include decontamination, decommissioning, site restoration, site monitoring, 

closure, and postclosure costs.

2

 Statement of Federal Financial Accounting Standards No. 6 defines general PP&E as any 

property, plant, and equipment used in providing goods or services. It typically has one or 

more of the following characteristics: (1) it could be used for alternative purposes (e.g., by 

other federal programs, state or local governments, or non-governmental entities) but is 

used to produce goods and services, or to support the mission of the entity, (2) it is used in 

business-type activities, or (3) it is used in activities whose costs can be compared to those 

of other entities performing similar activities (e.g., federal hospital services in comparison 

to other hospitals).
Page 2 GAO-02-117 Environmental Liabilities

The previous Chairman also requested a similar review of DOD’s training 

ranges that have associated environmental cleanup and disposal costs, and 

we recently issued a separate report on that category of PP&E.3

 We have 

also issued a series of reports related to the environmental liability 

associated with the cleanup and disposal of DOD’s weapons systems.4

Because DOD did not have a centralized or comprehensive system for 

identifying, summarizing, maintaining, and reporting the cleanup costs 

associated with all of its ongoing operations, we could not determine the 

full scope and magnitude of its related liability. Therefore, as agreed with 

your staff, we selected 6 of the more than 1,500 active installations reported 

by DOD—2 from each military service—to review. Based on DOD records, 

these installations appeared to have a high potential for environmental 

cleanup costs related to facilities and assets used in operations. We 

reviewed the associated environmental cleanup information at the 

installations and their respective regulatory agency offices. We also 

reviewed the information that was available in the real property records at 

the DOD installations we visited. Finally, we obtained cleanup cost 

estimates for those six installations.

3 Environmental Liabilities: DOD Training Range Cost Estimates Are Likely 

Understated (GAO-01-479, April 11, 2001).

4 Financial Management: Factors to Consider in Estimating Environmental Liability for 

Removing Hazardous Materials in Nuclear Submarines and Ships (GAO/AIMD-97-135R, 

August 7, 1997), Financial Management: DOD's Liability for Aircraft Disposal Can Be 

Estimated (GAO/AIMD-98-9, November 20, 1997), and Financial Management: DOD’s 

Liability for Missile Disposal Can Be Estimated (GAO/AIMD-98-50R, January 7, 1998).
Page 3 GAO-02-117 Environmental Liabilities

While we originally focused on ongoing operations, the information at the 

six installations we visited indicated that DOD also was not estimating and 

reporting liabilities associated with a significant portion of PP&E that was 

no longer being used in its operations. Neither DOD’s financial statements 

nor the Defense Environmental Restoration Program (DERP) Annual 

Report to Congress5

 have provided the Congress with cleanup cost 

information on all of DOD’s closed or inactive operations known to result 

in hazardous wastes. Therefore, we expanded our work to cover these 

additional unreported liabilities as well. We did not, however, verify the 

accuracy of most of the data that DOD provided to us.

Except as noted above, our work was conducted in accordance with 

generally accepted government auditing standards from August 2000 

through May 2001. Further details on our scope and methodology are 

included in appendix I. 

Results in Brief DOD has not yet developed the policies, procedures, and methodologies 

needed to ensure that cleanup costs required for all of its ongoing and 

inactive or closed operations are identified, consistently estimated, and 

appropriately reported. As a result, DOD’s financial statements and 

environmental reports continue to underreport environmental liabilities 

and the related long-term budgetary needs. Based on our work, the scope 

and magnitude of DOD’s unreported liabilities for the six installations we 

visited are significant; however, the installations appear to have the data 

needed to identify and estimate those liabilities. 

The installations we visited had a total of 221 sites6

 with total estimated 

cleanup costs of $259 million. Of these, only $61 million for 45 of the 221 

5

 The Office of the Deputy Under Secretary of Defense (Environmental Security) issues this 

report pursuant to 10 U.S.C. 2706. The report provides details on the technical and financial 

status of DOD’s cleanup of contamination resulting from past activities at current and 

former DOD installations, and formerly used defense sites, and outlines future cleanup 

plans and funding requirements. DERP cleanup at active installations and former defense 

properties is funded through five separate environmental restoration accounts included in 

DOD’s operation and maintenance appropriations: (1) Army, (2) Navy, (3) Air Force, (4) 

Formerly Used Defense Sites, and (5) Defense-Wide. Funding for cleanup at base 

realignment and closure installations occurs through a separate account included in DOD’s 

military construction appropriations.

6

 Sites consist of discrete locations on installations where contaminants either have been, or 

could potentially be, released into the environment. 
Page 4 GAO-02-117 Environmental Liabilities

sites was being reported for the DERP and, therefore, only that amount was 

likely included in DOD’s financial statements. We found that 149 sites 

related to ongoing operations with total estimated cleanup costs of $91 

million and 27 inactive and/or closed operations with total estimated 

cleanup costs of $107 million were not being reported by DOD. DOD has 

more than 1,500 active installations that may have the same issues we 

identified at the 6 installations we visited. 

The environmental offices at the six installations that we visited had 

comprehensive records for the installation sites subject to cleanup 

requirements. The initial identification of sites at these installations was 

the result of extensive investigations conducted pursuant to federal, state, 

and/or local regulations. We also found that the records were updated 

periodically by environmental personnel to reflect new sites and the 

current cleanup status of all sites. As a result, information needed to 

identify assets subject to cleanup requirements and to develop the related 

cost estimates was readily available at the six installations. However, DOD 

does not have the policies and processes in place to ensure that a cleanup 

cost estimate is prepared and reported for each identified site or to 

systematically accumulate and maintain these data at a departmentwide 

level. 

Although we found the environmental site records maintained for 

regulatory purposes at the individual installations visited to be reasonably 

accurate, the installation real property records used to maintain 

accountability over related land, buildings, and structures were 

significantly flawed. If properly maintained, the real property records 

should be a primary source for ensuring the accuracy of environmental site 

records. However, in our efforts to reconcile real property and 

environmental site records, we found significant differences. These 

differences represented errors related to sites that were not properly added 

to or deleted from the real property records, as well as sites incorrectly 

categorized in the real property records. For example, the real property 

records at one installation identified 48 underground storage tanks, while 

environmental site records showed that only 16 were in existence. 

Because we used DOD’s real property records to identify the six 

installations for our review, we may not have selected from among those 

with the highest potential for cleanup costs as we intended. As a result, 

DOD may have other installations with more significant cleanup costs than 

the ones we reviewed. 
Page 5 GAO-02-117 Environmental Liabilities

Finally, DOD does not have standard methodologies7 to develop consistent, 

reliable cost estimates. Each of the six installations independently 

developed its cost estimates using different methodologies. As a result, 

estimates for similar assets could have significant variances. For example, 

Camp Pendleton Marine Corps Base, California, used an “average removal 

cost” methodology to estimate the cost to remove a 20,000-gallon 

underground storage tank at $13,000. However, Fort Polk, Louisiana, 

elected to adjust a specific prior removal contract for another underground 

storage tank and estimated the cost to remove a 5,000-gallon underground 

storage tank at more than $43,000. 

Reporting of complete and accurate environmental liability estimates will 

require that DOD environmental, property management, and accounting 

personnel coordinate their efforts to develop and maintain comprehensive 

cleanup cost information and to develop and implement policies and 

procedures for consistently estimating and reporting all related liabilities. 

Therefore, we are making recommendations that address the need for DOD 

leadership and focus to ensure that the liability for environmental cleanup 

related to ongoing and inactive/closed operations is reported in accordance 

with federal accounting standards. Such leadership should address key 

issues, including (1) providing necessary guidance, (2) correcting real 

property records, (3) providing for the periodic reconciliation of real 

property and environmental site records, (4) developing and implementing 

standard methodologies for estimating related cleanup costs, and (5) 

systematically accumulating and maintaining the site inventory and cost 

information needed to report this liability. 

7

 By using the term “standard”, we mean that methodologies used to develop cleanup cost 

estimates for similar types of assets should be formalized so that they consistently include 

all applicable costing components (e.g., the actual cleanup activities of containment, 

removal, disposal, restoration, and monitoring) and provide for periodic updating for 

changes in inflation, current pricing, relevant physical circumstances, regulatory 

requirements, and intended technology use. The standard methodologies should then be 

validated to ensure that resulting estimates are accurate and reliable. 
Page 6 GAO-02-117 Environmental Liabilities

In commenting on a draft of this report, DOD concurred with the overall 

intent of our recommendations and fully concurred with our specific 

recommendation to designate a focal point to oversee and manage the 

reporting of DOD’s liability for the cleanup of all ongoing and 

inactive/closed operations. DOD partially concurred with the remaining 

three recommendations. In addition, DOD expressed concern that some 

aspects of the report were misleading due to its interpretation of certain 

terms used in the report. Specifically, DOD objected to the use of the term 

“cleanup” and instead preferred what it stated were the more precise terms 

of “environmental restoration” and “accrued environmental disposal cost.” 

However, the term “cleanup,” as used in this report, includes specific 

activities and costs encompassing more than just environmental 

restoration and/or disposal costs, in accordance with federal accounting 

standards.8

 The standards specifically include closure and postclosure 

costs. Therefore, to limit a discussion of cleanup costs to only those 

related to restoration and disposal inappropriately narrows the 

applicability of the accounting standard. Further, DOD stated that many of 

the statements related to our findings in the report were speculative and 

lacked supporting evidence. We disagree and reiterate our position that 

our findings and conclusions are well-supported by our results from the six 

installations we visited, as well as by the systemic weaknesses we 

identified in the areas of DOD-wide reporting systems, record-keeping, 

guidance for reporting environmental cleanup liabilities, and leadership 

and focus. Our detailed response to DOD’s specific comments is included 

in appendix III.

Background DOD is subject to various environmental laws and regulations that govern 

restoration (cleanup) of contamination from past operations and control of 

hazardous waste related to active facilities (ongoing operations). DOD 

must also follow federal accounting standards and its own Financial 

Management Regulation (FMR) to ensure complete recognition and 

financial reporting of the associated liabilities. DOD has taken incremental 

steps in recent years to report a more complete picture of its environmental 

liabilities, but substantial issues remain in certain areas, including 

8

 The Federal Accounting Standards Advisory Board (FASAB) promulgates accounting 

principles for federal government reporting entities. The FASAB standards provide 

generally accepted accounting principles covering most transactions for the federal 

government.
Page 7 GAO-02-117 Environmental Liabilities

accounting for and reporting estimated cleanup costs for all ongoing and 

inactive/closed operations.

Laws and Regulations The Congress passed the Comprehensive Environmental Response, 

Compensation, and Liability Act (CERCLA) in 1980 to provide a framework 

for cleanup of the nation’s worst hazardous waste sites. CERCLA focuses 

on the cleanup of inactive/closed hazardous waste sites and on making the 

parties responsible for generating and handling hazardous substances at 

these sites responsible for cleanup costs. In 1986, the Congress passed the 

Superfund Amendments and Reauthorization Act (SARA) which, among 

other things, established the DERP to implement DOD’s environmental 

cleanup activities. Through the DERP, a $2 billion per year program 

managed by the Deputy Under Secretary of Defense for Environmental 

Security (DUSD(ES)), DOD is cleaning up contamination at active military 

installations and former defense properties throughout the United States 

and restoring the land for new uses. DOD reports annually to the Congress 

on the status of DERP cleanup efforts and future funding requirements, 

largely based on data input from installations across the military services. 

DOD also uses installation DERP data to compile a significant portion of its 

environmental liabilities for financial statement reporting purposes. For 

fiscal year 2000, DOD reported approximately $18 billion on its financial 

statements for liabilities associated with DERP cleanup on active 

installations and formerly used defense sites.9

9

 DOD reported $63 billion in total environmental restoration and disposal liabilities in fiscal 

year 2000, comprised of $37 billion in environmental restoration liabilities—of which DERPfunded liabilities totaled $18 billion—and $26 billion for disposal of weapons systems and 

chemical weapons. The remaining $19 billion of restoration liabilities primarily relates to 

liabilities for cleanup of training ranges and base realignment and closure installations.
Page 8 GAO-02-117 Environmental Liabilities

Subtitle C of the Resource Conservation and Recovery Act (RCRA) of 1976, 

as amended, provides hazardous waste management requirements for 

generators and transporters of waste and owners and operators of 

treatment, storage, and disposal facilities. Hazardous waste has properties 

that make it dangerous or capable of having a harmful effect on human 

health or the environment. Some types of hazardous waste are identified 

by their source, that is, by the specific industrial processes that produce the 

waste, such as electroplating, which generates sludge from the wastewater 

treatment. Other types are defined by certain characteristics that make the 

waste hazardous, such as whether it is flammable, corrosive, reactive, or 

toxic. Examples of related operations include hazardous waste landfills 

and incinerators, open burn/open detonation sites, and hazardous waste 

storage facilities.10 RCRA also regulates the operation and closure of 

underground storage tanks containing petroleum or hazardous substances 

and governs the cleanup of tank releases. Under RCRA, operators of 

facilities that treat, store, or dispose of hazardous waste must typically 

obtain an operating permit subject to regulatory oversight and periodic 

renewal. Figures 1 and 2 show examples of a hazardous waste storage 

bunker and underground storage tank regulated under RCRA.

10 Subtitle D of RCRA addresses operations involving nonhazardous waste (e.g., household 

and/or agricultural garbage). Examples include sanitary landfills and certain bio-solid 

disposal operations.
Page 9 GAO-02-117 Environmental Liabilities

Figure 1: Hazardous Waste Storage Bunker 

Figure 2: Underground Storage Tank Being Transported After Removal
Page 10 GAO-02-117 Environmental Liabilities

Accounting Requirements Two federal accounting standards, Statement of Federal Financial 

Accounting Standards (SFFAS) Nos. 5 and 6, establish the criteria for 

recognizing and reporting environmental liabilities. SFFAS No. 5, 

Accounting for Liabilities of the Federal Government, effective beginning 

in fiscal year 1997, defines a liability as a probable future outflow of 

resources due to a past government transaction or event. SFFAS No. 5 

further states that recognition of a liability in the financial statements is 

required if it is both probable and measurable. SFFAS No. 6, Accounting 

for Property, Plant, and Equipment, supplements the requirements of 

SFFAS No. 5 with regard to PP&E cleanup costs, most notably those 

associated with general PP&E (e.g., landfills). Cleanup costs are defined as 

costs for removing, containing, and/or disposing of hazardous wastes or 

materials that, because of quantity, concentration, or physical or chemical 

characteristics, may pose a substantial present or potential hazard to 

human health or the environment. SFFAS No. 6, effective beginning in 

fiscal year 1998, requires that cleanup costs for general PP&E be allocated 

to operating periods in a “systematic and rational manner” based on use of 

the physical capacity of the associated PP&E (e.g., expected usable landfill 

area) whenever possible.11 If physical capacity is not applicable or 

estimable, cleanup costs may be accrued over the useful life of the 

associated PP&E. Regardless of allocation method, this accounting 

treatment should result in the accumulation of the total cleanup cost 

liability at the time when the PP&E ceases operation.

The Office of the Under Secretary of Defense (Comptroller) issues the 

FMR, which contains DOD’s financial management policies and 

procedures. DOD FMR Volume 4, Chapter 13, Accrued Environmental and 

Nonenvironmental Disposal Cost Liabilities, prescribes the accounting 

policy for estimating and recognizing liabilities associated with the 

disposition of property, structures, equipment, munitions, and weapons. 

DOD FMR Volume 4, Chapter 14, Accrued Environmental Restoration 

(Cleanup) Liabilities, prescribes the accounting policy for estimating and 

recognizing liabilities associated with the containment, treatment, or 

removal of contamination. Chapter 14 specifies that cost estimates 

reported by installations to DUSD(ES) for preparation of budgetary 

requests and the DERP Annual Report to Congress shall be used by DOD 

11 For general PP&E already in service as of the effective date of the standard, and 

associated with operations not charging a fee intended to recover costs, the estimated 

cleanup costs may be recognized in full when implementing the standard.
Page 11 GAO-02-117 Environmental Liabilities

components as the baseline for liability measurement for financial 

statement purposes.

Reported Environmental 

Liabilities

DOD’s financial statements should provide a comprehensive reporting of 

its environmental liabilities since, unlike the DERP Annual Report to 

Congress, the ultimate source of funding does not impact financial 

reporting requirements. DOD reported approximately $63 billion in 

environmental liabilities in its fiscal year 2000 financial statements, which 

was comprised of cost estimates for: (1) cleanup of nontraining range 

sites—$23 billion, (2) chemical weapons disposal—$15 billion, (3) training 

range cleanup—$14 billion, and (4) disposal of nuclear-powered aircraft 

carriers/submarines— $11 billion. Included in the $23 billion component 

were $18 billion for DERP-funded cleanup, as well as $1.4 billion and $175 

million disclosed separately by the Army and Air Force, respectively, for 

non-DERP cleanup on active installations. Army disclosed that of its 

reported $1.4 billion, approximately $500 million related to ongoing 

operations, including closure of open burn/open detonation sites. Army 

reported that the other $900 million related to elements that include RCRA 

corrective action/closure plans and underground storage tanks. 

Deficiencies in DOD’s reporting of environmental liabilities continue to be 

a major contributing factor to our inability to express an opinion on the 

federal government’s consolidated financial statements. For fiscal year 

2000, we reported that DOD did not maintain adequate systems or have 

sufficient information to develop an accurate estimate of key components 

of its environmental and disposal liabilities.12

Unreported Cleanup 

Liabilities Are 

Significant

We found that the scope and magnitude of unreported cleanup costs for 

ongoing and inactive/closed operations were significant at the six 

installations we visited. Although the installations have a process in place 

to accumulate the data needed for DERP reporting, this process does not 

encompass all operations with probable and reasonably estimable cleanup 

costs. Working largely with personnel already responsible for DERP 

12 Our audit report on the federal government’s fiscal year 2000 consolidated financial 

statements is included as an attachment in our testimony on the audit results – U.S. 

Government Financial Statements: FY 2000 Reporting Underscores the Need to 

Accelerate Federal Financial Management Reform (GAO-01-570T, March 30, 2001).
Page 12 GAO-02-117 Environmental Liabilities

reporting, we identified over 200 sites with estimated cleanup costs in 

excess of $250 million, most of which had not been previously reported. 

The 6 installations we visited had a total of 221 ongoing and inactive/closed 

sites requiring cleanup. We identified the sites by using environmental site 

records maintained at the installations, which we substantiated through a 

combination of regulatory agency record review, visual inspection, and 

interviews with personnel from the respective regulatory agencies and 

installation environmental offices. At our request, the installation 

environmental offices readily prepared or provided cleanup cost estimates 

totaling approximately $259 million for all 221 sites.

We found some sites at each installation already in various stages of 

cleanup, and some of these sites were being funded through the 

department’s environmental restoration accounts. Sites funded through 

these accounts are to be included in the DERP Annual Report to Congress 

and in DOD’s environmental liabilities reported in its financial statements. 

We confirmed that 45 of the 221 sites, with estimated cleanup costs of $61 

million, were included in DERP reporting by the installations.

The remaining 176 sites were not included in DERP reporting, and of the 

$259 million in estimated cleanup costs, $198 million, or 76 percent, was 

not reported through DERP and therefore likely not reported in DOD’s 

financial statements.13 Of the 176 unreported sites, 149 involved ongoing 

operations with total estimated cleanup costs of $91 million.14 The 

remaining 27 unreported sites were inactive and/or closed operations with 

13According to DOD officials, the DERP Annual Report is the basis for its financial statement 

reporting of inactive and/or closed operation sites on active installations. Our work did not 

include tracing data for the specific sites at the six installations we reviewed into the DERP 

Annual Report to Congress and DOD’s financial statements. However, it is unlikely that 

these specific sites are included in DOD’s reported liability because (1) a majority of the 

unreported costs that we identified were for inactive or closed operations that were not 

reported in DERP (see table IV.4) and (2) many of the estimates we cite were developed 

after DOD’s financial statements were compiled and reported. 

14 Accounting standards generally require that cleanup costs associated with operating 

facilities and assets be recorded and reported over the period of time that the assets are, or 

are expected to be, in use. Therefore, DOD is not required to report the total cleanup costs 

for ongoing operations as a liability in its financial statements. For the operating sites we 

looked at, only $37 million of the total $91 million would have to be reported as of fiscal year 

2000. However, agencies may choose to record the total liability for assets and facilities in 

use at the time the accounting standards became effective if no fees are charged to the users 

of those assets.
Page 13 GAO-02-117 Environmental Liabilities

total estimated cleanup costs of $107 million. Tables 1 and 2 provide 

additional details on the number/types of sites at the six installations, 

corresponding cleanup cost estimates, and reporting status. Appendix IV 

provides these data by installation.

Table 1: Estimated Cleanup Costs at the Six Installations Visited 

Table 2: Operational and Reporting Status of Cleanup Sites at the Six Installations 

Visited

a

Includes only those DERP reported sites falling within the scope of our review (e.g., inactive/closed 

landfills).

Based on our analysis of six installations, the amount of unreported 

environmental liabilities associated with ongoing and inactive/closed 

operations is significant. DOD stated in its fiscal year 1999 DERP Annual 

Report to Congress that it has over 1,500 funded active installations with 

approximately 6,000 sites in some stage of cleanup. We believe that other 

installations may have the same issues we found at the six we visited. In 

addition, given the deficiencies discussed later in this report regarding the 

real property records that we used to select the six installations we visited, 

Environmental category

Number

of sites

Estimated

cleanup costs

(in millions)

Hazardous, solid, and bio-solid waste landfills 51 $239.6

Hazardous waste storage facilities 18 2.2

Open burn/open detonation, chemical burning and fire 

training pits, and incinerators

19 7.6

Underground storage tanks 133 9.9

Total 221 $259.3

Operational and reporting status

Number

of sites

Estimated

cleanup costs

(in millions)

Sites included in DERP reportinga 45 $61.1

Unreported ongoing operation sites 149 91.1

Unreported inactive and/or closed operation sites 27 107.1

Total 221 $259.3
Page 14 GAO-02-117 Environmental Liabilities

some of the other installations could have even more significant cleanup 

costs than we identified.

DOD Accounting Guidance 

Inadequate for Operations 

Identified

DOD issued accounting guidance for environmental liabilities in 1999 by 

adding new chapters to the FMR. However, neither of the separate 

chapters issued for asset disposal and restoration/cleanup liabilities 

adequately addresses the types of unreported liabilities that we identified. 

Volume 4, Chapter 13, of the FMR applies to costs associated with asset 

disposal. Many of the cases that we identified do not involve the actual 

disposal of assets, but rather closure of an operation and, where necessary, 

cleanup of the site for future use. Landfills are a good example of this 

scenario—rather than selling the property when landfill operations cease, 

DOD usually caps or covers the facility for closure and conducts 

postclosure monitoring of the site consistent with regulatory requirements, 

usually for a period of at least 30 years. We did not find the guidance 

needed to report the liability for landfills in Chapter 13. 

SFFAS No. 6 specifically states that cleanup includes closure and 

postclosure costs. Therefore, Volume 4, Chapter 14, of the FMR, which 

applies to restoration (cleanup) liabilities, should encompass the types of 

operations that we identified. However, as currently written, this chapter 

does not clearly indicate that closure and postclosure activities are 

elements of cleanup. Chapter 14 defines cleanup as “...the containment, 

treatment, or removal of contamination that could pose a threat to public 

health and the environment.” As a result, this definition does not 

adequately address the types of operations that we identified, such as 

landfills, open burn/open detonation sites, and underground storage tanks. 

While Chapter 14 contains specific guidance on DERP cleanup and 

specifically references the site inventory and cost estimating guidance 

contained in the “DERP Management Guidance” document issued by 

DUSD(ES), it does not have equivalent guidance for non-DERP cleanup. As 

discussed previously, however, 176 (80 percent) of the 221 sites that we 

identified at the 6 installations, and 76 percent of the $259 million in 

estimated costs that we obtained for all sites, were not included in DERP 

reporting. Consequently, Chapter 14 would be further strengthened by 

specifically addressing non-DERP cleanup. 
Page 15 GAO-02-117 Environmental Liabilities

Real Property Records 

and Cost Estimating 

Methodologies Are Not 

Reliable 

Installation environmental offices at the six installations we visited 

maintain comprehensive records for their own sites and operations subject 

to cleanup requirements for regulatory purposes and have demonstrated 

that cleanup costs for ongoing and inactive/closed operations can be 

estimated.15 However, we found that corresponding real property records 

are not reliable and cost estimating methodologies are not standardized. 

Further, we found that DOD does not have the policies and formalized 

processes in place to systematically accumulate, maintain, and report site 

and cost data at a departmentwide level, as well as to ensure that these 

data are complete. As a result, DOD’s financial statements likely do not 

present an accurate, comprehensive report of its environmental liabilities 

as required by federal accounting standards.

Environmental Office 

Records Identify Cleanup 

Sites

The installation environmental offices that we visited had extensive 

records that identify cleanup sites by size and type. We found that the 

initial identification of sites by each of the six installations was the result of 

extensive investigations conducted pursuant to federal, state, and/or local 

laws. For example, as part of the RCRA permitting process, installations 

perform a comprehensive environmental assessment of all operations to 

identify actual and potential cleanup sites. This process results in a RCRA 

Facility Assessment Report (RFA), which documents the results of the 

assessment and includes a detailed list of identified sites. Figures 3 and 4 

show two examples of the types of sites identified in the RFA: an open 

burn/open detonation site and a landfill operation.

15 We did not audit the cleanup cost estimates prepared by the installations and therefore did 

not verify that all of the data elements needed to develop individual estimates were included 

and accurate. 
Page 16 GAO-02-117 Environmental Liabilities

Figure 3: Open Burn/Open Detonation Site
Page 17 GAO-02-117 Environmental Liabilities

Figure 4: Solid Waste Landfill

The environmental offices at all six installations had extensive knowledge 

of the sites listed in their own RFA and periodically updated the data, as 

required by the permitting process, to reflect newly discovered sites and 

the current cleanup status of all sites. Underground storage tanks, which 

represented over half of the 221 sites, are registered through state and local 

regulatory agencies and installation environmental offices have records to 

identify them. Thus, these offices maintain detailed environmental site 

records related to the RFA, updated permitting data, and underground 

storage tanks.

Real Property Records 

Cannot Be Used to Validate 

Environmental Site Records

According to DOD, real property records should be a comprehensive 

source of data for all installation land, buildings, and related structures, 

regardless of whether or not cleanup requirements apply.16 As such, if 

properly maintained, they should contain information needed to ensure the 

accuracy of environmental site records, including data on site descriptions, 

16 Defense Property, Plant and Equipment Accountability Manual (Draft), DOD Directive 

Number 5000.nn-xxx.
Page 18 GAO-02-117 Environmental Liabilities

in-service dates, and useful lives. Since both real property records and 

environmental office site records provide information needed to prepare 

DOD’s financial statements and are therefore subject to audit, periodic 

reconciliations between the two sets of records would help ensure their 

accuracy. However, we determined that the records maintained by each 

installation’s real property office were not being reconciled and did not 

agree with the environmental office site records that we had substantiated 

through review of regulatory agency records, visual inspection, and 

interviews. We investigated the differences and found significant errors in 

the real property records. These errors related to sites that were not 

properly added to or deleted from the real property records, as well as sites 

incorrectly categorized in the real property records.

We found a total of 237 errors in the real property records related to 

operations with hazardous waste. As table 3 shows, 206 of the 237 errors, 

or 87 percent, resulted from additions and deletions that were not made. 

The 206 were comprised of 182 adjustments to add property that existed 

but was not recorded, and another 24 to delete property that was recorded 

but no longer existed at the installations. The remaining 31 errors related 

to property that had been incorrectly categorized in the real property 

records. For example, we found both underground and aboveground 

storage tanks categorized together, even though different cleanup and 

closure requirements apply to each type of tank. Appendix IV provides 

these data by installation. Because we used the installations’ real property 

records, which we have since found to be unreliable, as the basis for our 

selection of the six installations for this review, we may not have chosen 

installations from among those with the most significant cleanup costs as 

we intended.

Table 3: Errors in Real Property Records

We found cases of significant numbers of additions and deletions not being 

made at some installations. For example, at Camp Pendleton Marine Corps 

Base, California, we identified 52 underground storage tanks that were not 

Types of errors Number of errors

Additions not made 182

Deletions not made 24

Categorized incorrectly 31

Total 237
Page 19 GAO-02-117 Environmental Liabilities

recorded in the real property records. At Fort Polk, Louisiana, the real 

property records showed 48 underground storage tanks, while the 

environmental site records showed only 16 in existence. Several real 

property office personnel cited problems in receiving the proper 

documentation from the base engineer or other installation personnel to 

prompt an adjustment to the real property records. We identified these 

significant errors despite existing requirements that installations perform 

periodic inventories of real property assets. 

We also found that policies regarding the recording of land-related assets 

were not consistently applied by the installations. For example, at two of 

the installations visited—Fort Carson, Colorado, and Cherry Point Marine 

Corps Air Station, North Carolina—we found that the installations’ real 

property offices did not always record assets related to land (e.g., landfills, 

open burn/open detonation sites, and fire training pits) in their records as 

required. For these two installations, we identified 33 additions that should 

have been made. However, we noted that the Fort Polk and Camp 

Pendleton real property offices did record landfills and other land-related 

assets. 

We found other inconsistencies in the recording of active and 

inactive/closed facilities in the real property records. For example, at 

several installations, active facilities were included in the records but 

inactive/closed facilities still incurring closure and postclosure costs were 

not included. Additionally, we noted instances where several real property 

assets located in the same vicinity were recorded as one asset. For 

example, at Fort Polk, the real property records showed one 160,000-gallon 

underground storage tank. After further review and inquiry, we determined 

that there were actually four separate 40,000-gallon tanks at that location. 

The remaining 31 errors that we found involved assets being incorrectly 

categorized in the real property records. For example, at Fort Polk, we 

identified 20 aboveground storage tanks that were categorized as 

underground storage tanks. Because different cleanup and closure 

requirements apply to each type of tank, the installations’ real property 

records must categorize these assets separately to support the 

environmental site records. 

The errors that we identified are symptoms of a lack of formal 

communication between the real property and environmental offices at 

some installations. Proper coordination between the property 

management and environmental management communities is critical to 
Page 20 GAO-02-117 Environmental Liabilities

ensuring consistent and reliable tracking and reporting for financial 

management, regulatory compliance, and other purposes.

Lack of Consistent 

Methodologies for 

Estimating Cleanup Costs

The environmental offices at the 6 installations that we visited were able to 

provide us with estimates of future cleanup costs for all 221 sites. 

However, DOD does not have standardized and validated methodologies 

for developing cleanup cost estimates and installation personnel used a 

variety of methods to develop those estimates. The methods used by the 

installation environmental offices included: (1) applying different costing 

models, including Remedial Action Cost Engineering and Requirements 

(RACER) and Means Cost Estimating, (2) tailoring cost estimates from 

prior closures to the specific characteristics (e.g., location, technology, 

type of waste, capacity) of the new site and adjusting for inflation, (3) 

relying on staff expertise and experience in cleanup cost estimating, and 

(4) using an average of prior actual costs.

The installations’ use of various costing methods resulted in significant 

variances in cleanup cost estimates for operations with similar cleanup 

requirements. For example, Fort Polk adjusted a recent removal contract 

and estimated the cost to remove a 5,000-gallon underground storage tank 

at approximately $43,000, while Camp Pendleton estimated the cost to 

remove a 20,000-gallon underground tank at only $13,000 by using an 

average of past removal costs. Based on inquiries of installation personnel 

responsible for the separate cost estimates, we could not identify a reason 

for the significant variance other than the different estimation methods that 

were used. 

Until DOD develops and validates standard methodologies for estimating 

cleanup costs, there is no assurance that these cost estimates will be 

comparable and reliable for decisionmaking and budget planning. DOD 

already has guidance in effect (DOD Instruction 5000.61; DOD Modeling 

and Simulation Verification, Validation, and Accreditation) which 

requires that cost models be validated to ensure that the results produced 

can be relied upon.
Page 21 GAO-02-117 Environmental Liabilities

Leadership and Focus 

on Cleanup Costs Are 

Lacking 

DOD lacks leadership to ensure comprehensive reporting of the cleanup 

costs for ongoing operations and certain inactive/closed operations on 

active installations. While the Office of the Deputy Under Secretary of 

Defense (Environmental Security) was created in 1993 as the office 

responsible for environmental cleanup within DOD, its primary focus has 

been on the cleanup of operations covered and reported by the DERP. 

Although the requirements for reporting liabilities for non-DERP cleanup 

have existed for years, DOD has not established adequate or consistent 

policies to reliably develop the required cleanup cost estimates or to ensure 

those estimates are maintained, accumulated, and reported in its financial 

statements. DOD also lacks procedures for periodic communication 

between environmental, real property, and accounting personnel to ensure 

that site and cost information is accurate and complete. We made this 

same observation in our recent report on cleanup cost estimates for DOD 

training ranges.17 

Conclusions Although detailed information exists to identify operations requiring 

cleanup and to estimate the related cleanup costs at the six installations we 

visited, DOD does not have a comprehensive, controlled process to 

capture, summarize, maintain, and report this data for all operations. DOD 

currently has a structured process in place to compile and report site and 

cost data for DERP cleanups; however, the department is not using this 

process for all cleanup costs associated with ongoing and inactive/closed 

operations. Since many of the same installation personnel manage DERP 

and non-DERP cleanups, the current framework could be expanded to 

encompass both. In addition, DOD is not routinely coordinating between 

installation property management and environmental management 

personnel. Consequently, DOD is not properly maintaining its real property 

records or reconciling them with environmental site records. 

These issues exist primarily because DOD does not have adequate 

guidance and leadership to ensure that: (1) all future cleanup costs are 

identified and reported as part of an overall approach to managing all of its 

environmental liabilities, and (2) real property records are properly 

maintained and coordinated with environmental site records. As our work 

reveals, the guidance and procedures must be developed and implemented 

17 Environmental Liabilities: DOD Training Range Cost Estimates Are Likely 

Understated (GAO-01-479, April 11, 2001).
Page 22 GAO-02-117 Environmental Liabilities

with effective coordination across the environmental, property 

management, and accounting communities. Until DOD addresses the 

issues discussed in this report, particularly in the areas of guidance and 

leadership, we cannot assure the Congress that DOD’s reported 

environmental liabilities can be relied on for long-range budget planning 

decisions. 

Recommendations We recommend that the Secretary of Defense designate a focal point with 

the appropriate authority to oversee and manage the reporting of DOD’s 

liability for the cleanup of all ongoing and inactive/closed operations.

We recommend that the Secretary of Defense require the DOD Comptroller 

to revise the FMR to include: (1) an expanded definition of cleanup, 

consistent with SFFAS No. 6, that includes closure/postclosure activities, 

and (2) guidance that addresses all restoration/cleanup liabilities, 

regardless of funding source or type of operation, in accordance with 

federal accounting standards.

We recommend that the Secretary of Defense require the Deputy Under 

Secretary of Defense (Installations and Environment) to ensure that (1) 

existing errors in real property records are corrected, and (2) real property 

and environmental site records are periodically reconciled.

We also recommend that the Secretary of Defense require the designated 

focal point to work with the appropriate DOD organizations to develop 

guidance and procedures to implement the revised FMR requirements, to 

include the following: (1) standardized and validated methodologies for 

estimating cleanup costs, and (2) a comprehensive, controlled process to 

systematically capture, summarize, maintain, and report the cleanup sites 

and costs resulting from all operations known to result in hazardous waste.

Agency Comments and 

Our Evaluation

On October 11, 2001, we received DOD’s comments, dated August 29, 2001, 

which addressed a draft of this report. In commenting on the draft, DOD 

concurred with the overall intent of our recommendations and fully 

concurred with our specific recommendation to designate a focal point to 

oversee and manage the reporting of DOD’s liability for the cleanup of all 

ongoing and inactive/closed operations. DOD partially concurred with the 

remaining three recommendations. Our response to DOD’s partial 

concurrences is included in appendix III. 
Page 23 GAO-02-117 Environmental Liabilities

In addition, DOD expressed concern that some aspects of the report were 

misleading due to its interpretation of certain terms used in the report. 

Specifically, DOD objected to the use of the term “cleanup” and instead 

preferred what it stated were the more precise terms of “environmental 

restoration” and “accrued environmental disposal cost.” However, the term 

“cleanup,” as used in this report (see footnote 1), is defined by federal 

accounting standards to include specific activities and costs encompassing 

more than just environmental restoration and/or disposal costs. To limit a 

discussion of cleanup costs to only those related to restoration and 

disposal inappropriately narrows the applicability of the accounting 

standard. In accordance with the definition of cleanup and the scope of the 

accounting standard, the estimated cost to clean up the 221 ongoing and 

inactive/closed sites identified in the report are for those actions required 

by federal, state, and/or local statutes to remove, contain, and/or dispose of 

(1) hazardous waste from property, or (2) material and/or property that 

consists of hazardous waste at permanent or temporary closure or 

shutdown of associated PP&E. If the required action—which in 

accordance with the accounting standard may include, but is not limited to, 

decontamination, decommissioning, site restoration, site monitoring, 

closure, and postclosure costs—has not been accomplished, the liability 

for the future costs still remains. Therefore, the liability for the estimated 

future costs to clean up the 221 sites in the report includes future closure 

and postclosure costs based on requirements in current operating permits, 

as well as liabilities for the remaining closure and postclosure costs of 

inactive/closed operations, and closure costs for underground storage 

tanks. Included also are liabilities for remaining costs of decontamination 

and/or site restoration required by corrective actions for previous 

contamination of inactive/closed operations.

DOD acknowledged that it did not fully estimate all of its environmental 

cleanup costs, but believes our report overstates the extent of the 

underestimation. However, our report focuses only on the results of our 

reviews conducted at six specific DOD installations and the extent of likely 

understatement by those installations. As discussed in the body of this 

report, 76 percent of the total estimated cleanup for the six installations, or 

$198 million, was not included in DERP reporting and therefore, likely not 

reported in financial statements. In addition, DOD stated that our report 

did not acknowledge a liability of $1.5 billion reported in its fiscal year 2000 

financial statements for the types of activities covered by the report. We 

disagree. Our draft report clearly stated that the Army disclosed $1.4 

billion for non-DERP cleanup on active installations. Although we 

continue to believe that we appropriately concluded that the Air Force’s 
Page 24 GAO-02-117 Environmental Liabilities

disclosure of $175 million in non-DERP cleanup was not significant to its 

financial statements, we have modified our report to specifically identify 

this amount.

Further, DOD stated that many of the statements made in this report were 

speculative and lacked supporting evidence. We disagree and have 

addressed DOD’s specific concerns in appendix III. Overall, we reiterate 

our position that our findings and conclusions are well-supported by our 

results at the six installations we visited, as well as the systemic 

weaknesses we identified in the areas of DOD-wide reporting systems, 

record-keeping coordination and maintenance, guidance in reporting 

environmental cleanup liabilities, and leadership and focus. Further, as 

explained in the introduction to the report and in appendix I, we intended 

to use a representative sample to respond to our requester’s question 

regarding the magnitude of cleanup costs associated with DOD’s ongoing 

operations. However, because DOD did not have a comprehensive system 

for identifying, summarizing, maintaining, and reporting cleanup costs for 

ongoing operations, DOD was unable to provide us with a reliable 

population from which to select a representative sample. Instead, we 

selected two installations from each of the three military services as 

examples and our conclusions about the magnitude of unreported 

liabilities relate only to those six installations. 

We are sending copies of this report to the Ranking Minority Member, 

House Committee on the Budget, and to other interested congressional 

committees. We are also sending copies to the Secretary of Defense; the 

Under Secretary of Defense for Acquisition, Technology, and Logistics; the 

Under Secretary of Defense (Comptroller); the Deputy Under Secretary of 

Defense for Installations and Environment; and the Director of the Office 

of Management and Budget. Copies will be made available to others upon 

request. 
Page 25 GAO-02-117 Environmental Liabilities

Please contact me at (202) 512-9095 if you or your staff have any questions 

about this report. Other GAO contacts and key contributors to this report 

are listed in appendix V.

Sincerely yours,

Gregory D. Kutz

Director

Financial Management and Assurance 
Page 26 GAO-02-117 Environmental Liabilities

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

Our objectives were to determine: (1) the scope of ongoing DOD 

operations with potentially significant cleanup costs, (2) the potential 

magnitude of costs to clean up and dispose of the hazardous waste 

resulting from those operations, and (3) the availability of data for 

developing cleanup cost estimates. Our review, with the exception of 

training ranges and weapons systems (national defense PP&E), included all 

ongoing and inactive/closed operations on six active installations known to 

result in hazardous waste and subject to federal, state, and/or local laws or 

regulations requiring removal, containment, or disposal of that waste. 

Compliance with federal accounting standards requires the recognition of a 

liability if a future outlay of resources is both probable and reasonably 

estimable. To determine if a cleanup liability was probable, we reviewed 

federal financial accounting standards, environmental laws and 

regulations, and DOD accounting guidance that address environmental 

cleanup requirements. We also interviewed DOD officials responsible for 

financial reporting and environmental program management and regional 

Environmental Protection Agency (EPA) officials responsible for 

overseeing the administration of federal environmental laws and 

regulations applicable to DOD operations. To determine if a cleanup 

liability was reasonably estimable, we interviewed state regulatory agency 

personnel responsible for administering federal, state, and local 

environmental laws and regulations that regulate DOD activities and 

similar commercial waste management operations. We obtained 

information on plans for cleanup, closure, and postclosure monitoring 

required as part of the permitting of waste management operations for both 

DOD and similar commercial activities. We also obtained information on 

cost estimates to accomplish those plans for commercial activities.

To determine the potential scope of DOD operations requiring 

environmental cleanup, we obtained the real property databases of each 

military service and extracted the assets whose category descriptions (e.g., 

hazardous waste storage facility) indicated an association with a hazardous 

or solid waste management or underground storage tank operation. 

Because DOD did not have a centralized or comprehensive system for 

identifying, summarizing, maintaining, and reporting the cleanup costs 

associated with all of its ongoing operations, we could not use 

representative sampling techniques to determine the full scope and 

magnitude of its related liability. Therefore, as agreed with our requester, 

we selected 6 of the more than 1,500 active installations reported by DOD 

to use as examples. To make preliminary planning decisions about the 
Appendix I

Objectives, Scope, and Methodology

Page 27 GAO-02-117 Environmental Liabilities

potential magnitude of the DOD-wide estimated future cleanup costs for 

the operations indicated by the real property extracts, we conducted a 

telephone survey of the regulatory officials from 13 states to determine an 

average estimated cleanup cost for similar commercial waste management 

operations. We applied the average commercial costs, making assumptions 

about operational status and remaining useful lives, to the extracted real 

property assets, and ranked individual installations in order of the resulting 

potential total cleanup costs. We then selected six DOD installations, two 

from each military service, to conduct on-site reviews of the actual scope 

and magnitude of the estimated future cleanup costs of their operations 

known to result in hazardous waste. With one exception, which was 

selected for its geographical location, the remaining five installations were 

selected from the top five in each service with what appeared to be the 

highest potential cleanup costs. Appendix II lists the primary locations 

where we performed our review.

To determine the scope and related future cleanup cost estimates of waste 

management operations and underground storage tanks for the six 

individual DOD installations selected, we conducted on-site reviews at the 

state regulatory agencies having jurisdiction over each installation, and at 

each selected DOD installation. 

Our objective at each state regulatory agency was to obtain an 

understanding of the nature, scope, and cleanup requirements of the waste 

management activities at each selected DOD installation. To accomplish 

this, we: (1) interviewed relevant state regulatory agency officials, (2) 

reviewed oversight, permitting, and compliance documents for the DOD 

installations, and (3) if available, obtained and reviewed documentation of 

cleanup cost estimates for similar commercial operations. 

Our objectives at each of the six DOD installations visited were to: 

• substantiate and supplement the information and insight gained at the 

regulatory agencies, 

• determine the scope of ongoing and inactive/closed operations requiring 

cleanup at each installation,

• determine the estimated cleanup costs for these operations, and

• determine the extent to which these cleanup costs are currently being 

reported for budgetary planning and financial statement purposes. 

To accomplish our objectives, we: (1) interviewed installation 

environmental officials and reviewed supporting documentation 
Appendix I

Objectives, Scope, and Methodology

Page 28 GAO-02-117 Environmental Liabilities

evidencing operations and their status, (2) reconciled listings of operations 

and/or related assets and their status, obtained from the regulator, to 

installation environmental office records, (3) physically observed the 

existence and status of selected operations and the related PP&E, (4) 

obtained future cleanup cost estimates prepared by the environmental 

office, (5) compared our findings to installation reporting for DERP 

purposes, and (6) reconciled our PP&E extracts from the military service 

real property databases, and supplemental information provided by 

installation real property office records, to environmental office records of 

operations requiring cleanup.

We summarized the data obtained and analyzed the results of our review by 

individual installation and environmental category (see appendix IV). We 

did not independently verify the reliability of the cleanup cost estimates, 

nor did we verify the existence or cleanup status of all relevant operations 

at each installation visited. 

Except as noted above, our work was conducted in accordance with 

generally accepted government auditing standards from August 2000 

through May 2001. On October 11, 2001, we received DOD’s comments, 

dated August 29, 2001, which addressed a draft of this report. DOD’s 

comments are discussed in the “Agency Comments and Our Evaluation”

section and are reprinted in appendix III, which also includes our detailed 

response to DOD’s specific comments.
Page 29 GAO-02-117 Environmental Liabilities

Appendix II

Locations Visited ApendxiI

We contacted personnel and conducted work at the following locations:

Department of Defense • DOD Inspector General Headquarters, Arlington, VA

Environmental Protection 

Agency

• Regional Office – Region VIII, Denver, CO

Air Force • Cannon Air Force Base, Environmental Flight & Pollution Prevention, 

Clovis, NM

• Vandenberg Air Force Base, Environmental Compliance/Pollution 

Prevention Section, Lompoc, CA

Army • Fort Carson, Division of Environmental Compliance, Colorado Springs, 

CO

• Fort Polk, Compliance Management Branch, Leesville, LA

• U.S. Army Forces Command, Internal Review Audit Compliance, 

McPherson, GA

Navy/Marine Corps • Camp Pendleton Marine Corps Base, Inspection & Compliance Division, 

Ocean City, CA

• Cherry Point Marine Corps Air Station, Environmental Affairs 

Department, Havelock, NC

State Regulatory Agencies • California Environmental Protection Agency – Department of Toxic & 

Substance Control, Southern California Region, Cypress & Glendale, CA

• County of San Diego – Department of Environmental Health, San Diego, 

CA

• Santa Barbara Public Health Department, Santa Barbara, CA

• Colorado Department of Public Health & Environment, Denver, CO

• Louisiana Department of Environmental Quality, Baton Rouge, LA

• State of New Mexico Environment Department, Santa Fe, NM

• North Carolina Department of Environment & Natural Resources, 

Raleigh & Washington, NC
Appendix II

Locations Visited

Page 30 GAO-02-117 Environmental Liabilities

Other Other individuals were contacted via telephone and electronic mail.
Page 31 GAO-02-117 Environmental Liabilities

Appendix III

Comments from the Department of Defense ApendxiI

See comment 1.

See comment 1.
Appendix III

Comments from the Department of Defense

Page 32 GAO-02-117 Environmental Liabilities
Appendix III

Comments from the Department of Defense

Page 33 GAO-02-117 Environmental Liabilities

See comment 2.
Appendix III

Comments from the Department of Defense

Page 34 GAO-02-117 Environmental Liabilities

See comment 3.

See comment 4.
Appendix III

Comments from the Department of Defense

Page 35 GAO-02-117 Environmental Liabilities

See comment 5.

See comment 6.

See comment 7.

See comment 8.
Appendix III

Comments from the Department of Defense

Page 36 GAO-02-117 Environmental Liabilities

See comment 4.

See comment 9.

See comment 1.

See comment 10.

See comment 2.
Appendix III

Comments from the Department of Defense

Page 37 GAO-02-117 Environmental Liabilities

GAO’s Comments The following are GAO’s comments on the letter dated August 29, 2001 

(received October 11, 2001), from the Department of Defense.

1. See the “Agency Comments and Our Evaluation” section of this report.

2. Chapter 14 of DOD’s FMR, “Accrued Environmental Restoration 

(Cleanup) Liabilities,” is intended to provide guidance in accounting for 

and accruing a liability for the costs associated with the containment, 

treatment, or removal of contamination that could cause a threat to 

public health and the environment. However, the included guidance 

centers around environmental cleanup primarily relating to restoration 

activities and costs. Chapter 13 of DOD’s FMR, “Accrued 

Environmental And Non-environmental Disposal Cost Liabilities,”

provides guidance in accounting for and accruing a liability for the 

costs associated with the disposal of property, structures, equipment, 

munitions, and weapons. As stated in the “Agency Comments and Our 

Evaluation” section, the federal accounting standard requirement to 

account for environmental cleanup cost encompasses more than the 

restoration and disposal costs guidance currently provided by the FMR. 

Regardless of the terminology used, we continue to recommend that 

the FMR address the broad range of activities included in the scope of 

the federal accounting standard, such as closure and postclosure 

monitoring costs.

3. On May 15, 2001, DOD created the new position referred to in its 

comment letter, the Deputy Under Secretary of Defense (Installations 

and Environment), within the Acquisition, Technology and Logistics 

office. Because DOD has combined responsibility for both real 

property and environmental issues in this position, we modified our 

recommendation to require the Deputy Under Secretary of Defense 

(Installations and Environment) to correct errors in real property 

records and to reconcile those records with environmental site records.

4. We have modified the report to clarify the definition of “standard” as 

used in this report and to change the word “methodology” to 

“methodologies.” The underground storage tank example in our report 

illustrates how the use of nonstandard methodologies can result in 

inconsistent and incomparable cost estimates.

5. We disagree that the report’s conclusions about the significance of 

DOD’s unreported liabilities are not supported. As discussed in the 
Appendix III

Comments from the Department of Defense

Page 38 GAO-02-117 Environmental Liabilities

body of our report and in the “Agency Comments and Our Evaluation”

section, the unreported environmental cleanup liability for the six 

installations visited was 76 percent of the total estimated cleanup costs 

for these locations. The report’s “Conclusions” section points out the 

lack of and/or weaknesses in DOD-wide reporting systems, recordkeeping coordination and maintenance, and leadership and guidance in 

reporting environmental cleanup liabilities. When considered in light of 

these DOD-wide weaknesses, we believe the unreported cleanup 

liabilities found at the visited installations are more than adequate 

support for our conclusion. Nevertheless, in response to DOD’s 

concern, we have modified our report to state that until DOD addresses 

the issues discussed in this report, particularly in the areas of guidance 

and leadership, we cannot assure the Congress that DOD’s reported 

environmental liabilities can be relied on for long-range budget 

planning decisions.

Further, as stated in footnote 12 to our report, federal accounting 

standards do not require DOD to record the entire cleanup cost of 

ongoing operations as a liability on its current financial statements. 

However, those same accounting standards (SFFAS No. 6, par. 109) 

would require disclosure of the unrecognized portion of estimated total 

cleanup costs. In other words, DOD would be required to disclose in 

the footnotes to its financial statements that portion of the estimated 

total liability of $91 million for environmental cleanup of ongoing 

operations not reported as a liability on its financial statements.

6. We agree that the scope of our work did not include an audit of all the 

real property records at the installations visited and have clarified the 

wording of our report to address only the relevant real property 

records.

7. DOD is correct in observing that we were purposely trying to survey the 

installations with the highest potential costs. In lieu of using a 

representative sample (which was not possible due to problems in 

identifying a reliable population from DOD’s records, as discussed in 

comment 8), we selected, with one exception, two installations in each 

service from the top five having the highest potential environmental 

cleanup cost. This was an attempt to obtain as complete an 

understanding as possible of the broad range of cleanup activities that 

may be associated with DOD’s ongoing operations. Further details on 

our methodology are disclosed in appendix I, “Objectives, Scope, and 

Methodology.” Our assessment of potential environmental cleanup 
Appendix III

Comments from the Department of Defense

Page 39 GAO-02-117 Environmental Liabilities

costs for individual installations was based on data obtained from 

DOD’s real property records. Review of this data during our installation 

visits disclosed significant errors in the relevant real property records, 

which in turn caused the initial determinations of potential cleanup 

costs to be unreliable. Thus, we could no longer be certain whether 

other DOD installations would have had higher potential cleanup costs 

than those selected.

8. We disagree with DOD that our methodology deviated from standard 

governmental auditing procedures. Audit sampling is applicable only 

when the auditor expects to draw a conclusion about a population. 

Because DOD did not have a comprehensive system for identifying, 

summarizing, maintaining, and reporting cleanup cost for ongoing 

operations, DOD could not provide a reliable population from which to 

select a representative sample. Instead, as stated in the body of our 

report and more fully disclosed in appendix I, “Objectives, Scope, and 

Methodology,” we selected two installations from each of the three 

military services as examples, and reached conclusions about the 

magnitude of unreported liabilities for only those six installations. Our 

selection was not intended to be a representative sample of DOD 

installations and we drew no conclusions about any population based 

solely on the results of our review of the six installations.

9. We have modified the report to disclose the amount actually reported 

by the Air Force.

10. Because DOD could not provide us with detailed lists of all the costs 

that comprise its reported liability, we have modified the report to 

indicate that estimated cleanup costs not reported through DERP were 

“not likely” to have been reported in DOD’s financial statements. We 

also clarified our support for this issue in footnote 13.
Page 40 GAO-02-117 Environmental Liabilities

Appendix IV

Installation-Level Data on Environmental 

Sites, Estimated Cleanup Costs, and Errors in 

Real Property Records ApendxiIV

Table 4: Type and Number of Sites Requiring Cleanup

Table 5: Operational and Reporting Status of Sites Requiring Cleanup

a

Includes only those DERP reported sites falling within the scope of our review (e.g., inactive/closed 

landfills.)

Installations visited

Environmental category

Cannon

AFB, NM

Vandenberg

AFB, CA

Ft. Carson,

CO

Ft. Polk,

LA

Camp

Pendleton

MCB, CA

Cherry

Point

MCAS, NC Total

Hazardous, solid and bio-solid waste 

landfills

13 5 14 6 3 10 51

Hazardous waste storage facilities 1 1 1 0 13 2 18

Open burn/open detonation, chemical 

burning and fire training pits and 

incinerators

4 1 64 0 4 19

Underground storage tanks 0 9 43 16 52 13 133

Total 18 16 64 26 68 29 221

Installations visited

Operational and reporting status

Cannon

AFB, NM

Vandenberg

AFB, CA

Ft. Carson,

CO

Ft. Polk,

LA

Camp

Pendleton

MCB, CA

Cherry

Point

MCAS, NC Total

Sites included in DERP reportinga 3 4 18 7 1 12 45

Unreported ongoing operation sites 3 12 40 18 67 9 149

Unreported inactive and/or closed 

operation sites

12 0 6 1 0 8 27

Total 18 16 64 26 68 29 221
Appendix IV

Installation-Level Data on Environmental 

Sites, Estimated Cleanup Costs, and Errors 

in Real Property Records

Page 41 GAO-02-117 Environmental Liabilities

Table 6: Estimated Future Cleanup Costs by Environmental Category (in millions)

Table 7: Estimated Future Cleanup Costs by Operational/Reporting Status (in millions)

a

Includes only those DERP reported sites falling within the scope of our review (e.g., inactive/closed 

landfills.) 

Note: Totals may not add due to rounding.

Installations visited

Environmental category

Cannon

AFB, NM

Vandenberg

AFB, CA

Ft. Carson,

CO

Ft. Polk,

LA

Camp

Pendleton

MCB, CA

Cherry

Point

MCAS, NC Total

Hazardous, solid and bio-solid waste 

landfills

$100.7 $32.4 $30.8 $15.8 $41.4 $18.6 $239.6

Hazardous waste storage facilities .1 .3 .2 0 1.3 .4 2.2

Open burn/open detonation, chemical 

burning and fire training pits and 

incinerators

.4 .3 .4 3.8 0 2.7 7.6

Underground storage tanks 0 .2 1.7 .8 .7 6.5 9.9

Total $101.2 $33.1 $33.0 $20.4 $43.3 $28.2 $259.3

Installations visited

Operational and reporting status

Cannon

AFB, NM

Vandenberg

AFB, CA

Ft. Carson,

CO

Ft. Polk,

LA

Camp

Pendleton

MCB, CA

Cherry

Point

MCAS, NC Total

Costs included in DERP reportinga $ .4 $ 6.2 $14.7 $15.2 $ 3.5 $21.2 $61.1

Unreported costs for ongoing operation 

sites

3.4 27.0 18.1 5.0 36.9 .7 91.1

Unreported costs for inactive and/or 

closed operation sites

97.4 0 .2 .2 2.9 6.4 107.1

Total $101.2 $33.1 $33.0 $20.4 $43.3 $28.2 $259.3
Appendix IV

Installation-Level Data on Environmental 

Sites, Estimated Cleanup Costs, and Errors 

in Real Property Records

Page 42 GAO-02-117 Environmental Liabilities

Table 8: Errors in Real Property Records

Installations visited

Types of errors

Cannon

AFB, NM

Vandenberg

AFB, CA

Ft. Carson,

CO

Ft. Polk,

LA

Camp

Pendleton

MCB, CA

Cherry

Point

MCAS, NC Total

Additions not made 11 14 52 24 54 27 182

Deletions not made 0 0 0 24 0 0 24

Categorized incorrectly 5 0 1 20 4 1 31

Total 16 14 53 68 58 28 237
Page 43 GAO-02-117 Environmental Liabilities

Appendix V

GAO Contacts and Staff Acknowledgments ApendxiV

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Lisa Powell, Ben Severson, and Patrick Tobo.

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